How Credit Card Promotional Rates Work

Learn to Spot a Great Promo Rate

Credit card promotional rate, often shorted to “promo rate,” is a low interest rate offered on your credit card balance for a certain period of time. The promotional rate is often an introductory interest rate only offered during the first few months after you open the credit card account. Occasionally, some credit card issuers offer promotional rates to existing credit card users.

Promotional Rates Last for a Certain Amount of Time

Federal law requires that promotional rates must last at least six months. Some of the best credit cards have promotional rates that last as many as 18 months. Some credit cards express the promotional rate as a number of billing cycles which may be shorter than the same number of months. For example, a 10 billing cycle promo rate would last around 8 months (assuming a 25-day billing cycle).

You could lose your promotional rate before the promotional period expires if you become more than 60 days late on your credit card payment. Once you've lost the promotional rate, you won't get it back, even if you subsequently make your payments on time.

Certain Balances Get Promo Rates

In years past, it was more common for promotional rates to be offered only for balances transferred. However, more credit card issuers are extending the promotional rates to both purchases and balance transfers. Cash advances rarely receive promotional interest rates.

Paying Off Balances With Promotional Rates

By law, credit card issuers are required to apply the minimum payment to balances with the highest interest rate. Anything above the minimum can be applied to the lowest rate balance. It's best to limit your credit card transactions to just one type - the one that gets the promotional rate - at least until your promotional rate expires. That way you can be sure your payment is going to the balance with the best interest rate.

Pay off your balance before it expires to get the most of your promotional rate. Otherwise, you lose the benefit of having an abnormally low interest rate. This is especially true when your promotional rate applies to a balance transfer.

Beware High Post-Promotional APRs

Be prepared for your interest rate to increase significantly when the promotional rate expires. In fact, you should know what the post-promotional interest rate is going to be before you accept the offer. It may change your mind about the deal completely.

Don't Confuse With Deferred Interest

Deferred interest financing plans are often promoted similarly to 0% introductory offers. The same "No interest" and "0%" phrasing often accompanies these offers, however, deferred interest is very different and not in a good way. With deferred interest financing, you must pay the full balance to avoid paying interest. If you have any balance left over after the promotional period ends, the full interest backdated to the first day of your balance is added to your account.

With a promotional APR, any unpaid balance doesn't accrue interest until the promotional period ends.